Welcome to the fifth article of The next wave in digital payments series, following up on our last article about Learning from disruption.
While the new wave of digitization could put profits at risk for U.S. banks,1 financial institutions can embrace the opportunities to innovate and adapt, potentially unlocking greater value through consumer-centric, collaboration-based products and solutions. Without doing so, they increase their risk of being excluded from the value ecosystem. This could prove disastrous.
As former Nokia CEO Stephen Elop stated in his “Burning Platform” memo, “Our competitors aren’t taking our market share with devices; they are taking our market share with an entire ecosystem.”2 To become disruptors in their own right, financial institutions must respond to consumer behaviors, concerns and desires through the creation of new products, services or delivery systems that meet their customers’ needs across their entire lifecycle, both organically and through cross-industry partnerships.
As difficult a task as that may seem, there is good news: recent disruptions provide important lessons for financial institutions, and Visa is here to help. In getting started, it’s essential to remember the key technological drivers that have enabled disruptions to the payments ecosystem. More importantly, by recognizing them, firms can begin to consider the direction their innovations may take. These drivers and approaches include:
- Universal connectivity: As financial institutions harness the power of universal connectivity, they can extend customer offerings to new channels, incorporate person-to-person (P2P) offerings, digitize and streamline manual processes and more.
- Unified data: By providing digital lifecycle management, institutions can use analytics to serve customers holistically, as well as address and combat fraud by using some of the latest security techniques.
- Lower barriers to entry: As digitization lowers the barriers to entry, financial institutions can offer on-demand solutions that differentiate and deepen customer loyalty through active engagement.
- Simplify integration: By designing customer-centric services with easy access APIs (Application Programming Interfaces), financial institutions can enable the creation of additional products and services that exemplify their responsiveness to customer needs.
Recognizing the impact of these drivers, Visa has been working diligently to create solutions that help financial institutions, merchants and technology players develop payment strategies that enhance their opportunities in the value chain. We call it Visa’s Digital Playbook.
To help address consumers’ increased connectivity, Visa has created opportunities to engage through the Internet of Things (IoT) and mobile with Visa Token Service, through new P2P use cases with Visa Direct and by streamlining manual processes with the Connected Card approach.
The Visa Token Service is a turnkey solution that streamlines the process by which financial institutions, merchants, and technology partners enable new payment form factors. The Visa Token Service has evolved since its launch in 2014 to support experiences including third-party and financial institution mobile proximity payments, card-on-file and eCommerce tokenization, and payments through IoT devices. Meanwhile, Visa Direct is a fast and convenient technology for Person-to-Person transfers and Business-to-Consumer disbursements, especially when compared to checks or ACH bank transfers. At its core, Visa Direct aligns with connected consumers’ expectation of instant and omnichannel experiences. With Visa Direct, issuers can offer real-time3 payments solutions to their customers without needing significant investment in back-end infrastructure.
These offerings ladder to the opportunity provided by Visa’s Connected Card experience, which mitigates the pain points associated with today’s physical credit cards–delivery, activation, provision, loss, etc.
When it comes to unified data, Visa offers data-rich opportunities to its partners. For example, through Visa Performance Solutions, Visa’s consulting and analytics experts are available to help financial institutions develop insights-driven strategies to meet consumer needs. VisaVue Online enables issuers to quickly and easily segment their cardholder base according to specific spending habits, and then use this information to refine their marketing, prepaid or co-brand programs for greater profitability. And Visa has created a suite of risk mitigation tools–from Mobile Location Confirmation to Consumer Transaction Controls–using data to help institutions solve consumer pain points and take advantage of their digital touchpoints to deliver greater value to their cardholders.
Perhaps the best example of creating products that enhance customer stickiness is Visa Checkout. Visa Checkout facilitates online and in-app payments, ensuring an easy and secure way for consumers to pay, which can help increase conversion rates and transaction volumes for merchants. And with lIttle technical investment, no additional costs, and relationships with Android Pay, Samsung Pay and others, Visa is intent on making Visa Checkout as frictionless as possible for all involved. Another example is the Visa Commerce Network, can make it easier for merchants to deepen customer engagement and loyalty through targeted marketing efforts, offers and rewards. Visa Commerce Network can enable merchants to scale their audience reach with relevant offers that can increase spend on their issued cards.
And finally, Visa has been working to simplify the integration of its products through the creation of the Visa Developer Platform and One Market Center.
Visa’s Developer Platform opens VisaNet to business leaders and developers to create new applications and payment experiences for their consumers by providing API integrations to the Visa network, data, offers and value-added processes. This can help enable developers to benefit from Visa’s extensive reach, security, and expertise, and to innovate on top of one of the world’s largest payment networks. Perhaps more importantly, with access to Visa’s solution architects, clients can discuss and ideate against their specific pain points and innovate faster and more cost effectively. And finally, Visa’s One Market Center provides a space where prototypes can often be activated and tested in a real setting with the assistance of Visa staff. Together, these offerings enable Visa to help coordinate and speed the innovation roadmaps of its partners.
These innovations and offerings are only the beginning. Visa continues to develop its own innovation roadmap, responding to new technology trends as they appear, expanding the opportunities in the value chain and facilitating the growth of the payments industry overall.
To learn more read the full report.